Principles of Microeconomics, 7th Edition

Published by South-Western College
ISBN 10: 128516590X
ISBN 13: 978-1-28516-590-5

Chapter 6 - Part II - Supply, Demand, and Government Policies - Questions for Review: 1

Answer

An example of a price floor is a minimum wage for workers in the economy. An example of a price ceiling is the control of rent prices in certain cities, which prohibits landlords from selling apartments above a certain price.

Work Step by Step

A price floor is a legal minimum on the price at which a good must be sold. If the price floor is above the equilibrium price, the market price for the good will be at the price floor. A price ceiling is a legal maximum on the price at which a good must be sold. If the price ceiling is below the equilibrium price, the market price for the good will be at the price ceiling.
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